CAKE Tokenomics Proposal 3.0: True Ownership, Simplified Governance and Sustainable Growth

Governance
5

Hey,

I strongly advise against that proposal.

We see here that the main issue is Magpie canibalising most rewards, through bribes with their own printed out of thin air token, that is only backed by voting power seized from CAKE holders.

An easy fix would be to cap the mCAKE, mPENDLE, mBTC, msweth, mstETH, MGP, and CKP pairs to 0.25% of inflation and your capital allocation will be way more efficient.

These pairs don’t bring much value to Pancake as they are pretty much all fully depegged by design, and therefore, users are trapped and can’t trade in or out.

These is all something that I have warned you about when you launched veCAKE, as I have seen it happen everytime in the past on Curve, Balancer, and Frax. Two-token model (mCAKE + CKP) is detrimental for the underlying protocol, but that doesn’t mean that the veCAKE model is bad. It just means you need to control the convex fork, and PancakeSwap has the means to do that through gauge emission caps.

If you deprecate veCAKE, you will:

  1. Destroy the trust of protocols building on top of PancakeSwap
  2. Loose a lot of coincentives from projects engaging in bribing
  3. Stop being the go to place for new protocols launching their governance token (why going to Pancake when you can go to Uniswap if you can’t even bribe to get some co-incentives towards your pool?)
  4. Loose an important revenue stream for CAKE holders
  5. Loose a mechanism that favors long term alignment of holders and reduces the sell pressure in highly volatile times.

There is a problem in the way rewards are currently distributed, but the solution is not to deprecate the very good veCAKE model (one of the best veModel I see in the market right now). Just stop giving 25% of emissions to Magpie.

A solution could be to do burn-based bribes with revenue sharing, basically the same idea as the Pendle model, which is working extremely well: pools that generate fees get the emissions. That would be a great solution, as it doesn’t prevent other protocols from depositing bribes, but they will have to compete with pools generating fees, and bribes will be much more expensive.

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